DILI, EAST TIMOR, Jul 2 (IPS) - Pressure to resign is mounting on East
Timor's Prime Minster, Xanana Gusamo, amid claims that he misused
authority when he signed-off on a multi-million dollar government contract
last year to a company his daughter has ties with.

Fernanda Borges, leader of the opposition National Unity Party, has
demanded that Gusmao be held accountable for his role in the awarding of a
contract to import subsidised rice worth $3.5 million to Prima Food, a
company his daughter Zenilda Gusmao owns a stake in.

"Did Zenilda Gusmao have a business before her father became
important? No. Does Zenilda Gusmao have the right to a government
contract? No," she told IPS. "That's not why Mr Gusmao was
elected."

Under East Timorese parliamentary law, the prime minister is required
to sign off on all government contracts above $1 million, and government
tenders cannot be awarded to companies in which close family members of
government officials, including the prime minister, have a stake exceeding
10%.

Money for the rice contract came from the country's Economic
Stabilization Fund, which functions partly to ensure food prices are kept
under control. The opposition is raising questions about whether the rice
in question was even imported.

"Did the rice come in? Where is the rice? People out in the
districts, a lot of them have not received any rice or had the opportunity
of buying cheap rice from the government. So where did all that rice go or
did it ever come in? We don't have proof," Borges said.

But the government refutes the allegation.

Deputy Prime Minister Mario Carrascalao says the contract being signed
off may have simply been an oversight.

"OK, he signed that without going through and examining it,"
he said. "[The government] distributed money to [16] enterprises. In
one of those enterprises there is the daughter of the prime minister, but
she is not alone. The enterprise called Prima Food is not just her
enterprise. She is one of the associated members, so I don't think the
prime minister did anything wrong when he signed it."

The prime minister also has the backing of the East Timorese President
Jose Ramos-Horta.

"Just because someone became president, became prime minister,
became a minister, does not mean his family all have to go into
unemployment, all have to sell their business and stop," he told
Radio Australia.

However, the opposition isn't buying the explanation. "My worry is
if he stays and he thinks that, especially with all this denial and weird
interpretation of our Constitution and existing laws, that [the
government] can give families contracts," Borges said. "What are
we building here? A state for [their] families?"

Arsenio Bano, an opposition MP from the Fretilin party, demands that
the prime minister step down.

"The rice contract is one of the biggest scandals. It is
demonstrating nepotism. We will keep pushing for [Xanana Gusmao] to be
accountable and even to resign as prime minister," he said. "He
can't sign under the law a contract with a company that his own daughter
is in."

East Timor became independent in 2002 three years after an overwhelming
majority of the population voted in favour of separation from Indonesia
after a brutal 24-year occupation. If opposition protests grow louder,
this scandal could pose a real threat to the stability of this new
democracy.

But Christopher Samson, a campaigner from Lalenok Ba Ema Hotu, a Dili-based
anti-corruption watchdog, cautions that it is a bit too early to jump to
conclusions.

"[The] law did not say that families of ministers or the prime
minister or members of government should not participate in
business," he said. "I feel there should be an investigation
before we speak about this process."